A series of rare earth elements (REEs)-modified and Mobil Composition of Matter (MCM)-22-supported Pd nanocrystal catalysts were synthesized via a high-temperature solution-phase reduction method and tested for toluene complete oxidation. These catalytic materials were systematically characterized by N2 adsorption/desorption, X-ray powder diffraction (XRD), scanning electron microscopy (SEM), high-resolution transmission electron microscopy (HRTEM), energy-dispersive spectroscopy (EDS), inductively coupled plasma atomic emission spectroscopy (ICP-AES), temperature-programmed surface reaction of toluene (toluene-TPSR) and X-ray photoelectron spectroscopic (XPS) techniques in order to investigate the structure–catalytic property relationship. Moreover, catalysts with an appropriate yttrium content greatly improved the catalytic activity of 0.2%Pd/MCM-22. PdOx (x = 0, 1) nanoparticles, ranging from 3.6 to 6.8 nm, which were well distributed on the surface of MCM-22. Efficient electron transfer from the Pd2+/Pd0 redox cycle facilitated the catalytic oxidation process, and the formation of Pd (or Y) –O–Si bonds improved the high dispersion of the PdOx and Y2O3 particles. Toluene–TPSR experiments suggested that the addition of Y2O3 improved the physical/chemical adsorption of 0.2%Pd/MCM-22, thus increasing the toluene adsorption capacity. Then, 0.2%Pd/7.5%Y/MCM-22 exhibited the highest catalytic performance. In addition, this catalyst maintained 95% conversion with high resistance to water and chlorine poisoning, even after toluene oxidation at 210 °C for 100 h, making it more valuable in practical applications.